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Arbor Systems and Gencore stocks both have a volatility of 32%. Compute the volatility of a portfolio with 50% invested in each stock if the
Arbor Systems and Gencore stocks both have a volatility of 32%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1.00, (b) 0.50, (c) 0.00, (d) -0.50, and (e) - 1.00. In which of the cases is the volatility lower than that of the original stocks?
(a) + 1.00,
(b) 0.50,
(c) 0.00,
(d) -0.50,
and (e) - 1.00.
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